If you have decided to establish a trust, it is easy to become overwhelmed. There are several types of trusts and each trust has advantages and disadvantages. How do you know which trust will work best for you? Here are three of the most common types of trusts that you can choose from.
A bypass trust is for married couples who do not want to deal with estate tax liability. Each person sets up an estate planning document and leaves the property up to the maximum allowed under the estate tax exclusion. Then, they leave the rest to the other spouse. The property that you leave to your spouse qualifies for a marital deduction. When one spouse dies, the other receives the property without taxes attached. The rest of the property in the trust increases in value beyond the exclusion amount without estate taxes. This allows the surviving spouse to get support from the trust and when the surviving spouse dies, the beneficiaries do not have to worry about more estate taxes.
Asset Protection Trust
Asset protection trusts are designed to keep money away from creditors. In an asset protection trust, you are transferring your ownership of the assets to the trustee and he or she will manage those assets for you. If you work in an industry where it is common for you to have to deal with lawsuits, then this type of trust can be extremely helpful. Domestic asset protection trusts are only allowed in 19 states.
Everyone has different circumstances. Specialized trusts include:
- Special needs trusts
- Spendthrift trusts
- Charitable trusts
If you have a beneficiary who has difficulty with his or her spending habits, then you may want to think about a spendthrift trust. This type of trust can restrict the amount of money that he or she takes from the trust and can even dictate the types of purchases allowed. Special needs trusts, on the other hand, provide care for those who may have special needs. Many people use special needs trusts to care for children if they do not want the inheritance to hurt their chances of collecting disability.
Every person and every family has different needs when it comes to an estate plan. If you discuss your options with a professional like an estate planning attorney from a law firm like Klenk Law today, an attorney can help lead you in the right direction. After all, there are a lot of different trusts to consider.